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Various and Sundry Items From the Last Week

Nasdaq Proposes Changes to Marketplace Rule 5605 Relating to the Composition of Board Committees

On Wednesday the Commission published a notice soliciting comments on proposed changes to certain subsections of Nasdaq’s Marketplace Rule 5605 relating to the independence requirements of a listed company’s audit, compensation and nominations committees.

Rule 5605 generally requires that a company’s audit, compensation and nominations committees be comprised entirely of independent directors. There is a limited exception to the independence requirements (found in each of subsections (c)(2)(B), (d)(3) and (e)(3) of Rule 5605) that allows for one non-independent director to serve on a committee for up to two years if a company’s board affirmatively finds that the non-independent director’s membership is required by the best interests of the company and its shareholders.

If Nasdaq’s proposed rule changes are accepted a non-independent director with a family member who is a non-executive employee would be permitted to serve on a committee under the limited exception. As the rule is currently drafted this is not possible, even though having a family member who is a non-executive employee would not otherwise disqualify an independent director from being independent.

The text of Nasdaq’s proposed rule changes are reproduced below.

The GAO’s Report to Congress on the Commission’s Oversight of FINRA 

Section 964 of the Dodd-Frank Act requires the Government Accountability Office (GAO) to submit a report to Congress evaluating the Commission’s oversight of national securities associations registered under Section 15A of the Exchange Act, of which FINRA is the only one. On Wednesday the GAO released its report, entitled Opportunities Exist to Improve SEC’s Oversight of the Financial Industry Regulatory Authority, which examines, among other things, how the Commission oversees FINRA rule proposals and the effectiveness of FINRA’s rules and how the Commission plans to enhance its oversight of FINRA. The report emphasizes the utility of retrospectives reviews and recommends that the Commission encourage FINRA to conduct its own retrospective rule reviews and that the Commission establish a process for examining those reviews.

The GAO’s full report is reproduced below.

The Commissioners may be Attending Friday’s Meeting of the Advisory Committee on Small and Emerging Companies

On Friday the Commission published a Sunshine Act Meeting Notice related an earlier notice for a public meeting of the Advisory Committee on Small and Emerging Companies to be held this Friday.

The Committee will be discussing the JOBS Act and other matters related to rules and regulations that affect small and emerging companies. The reason for the second, Sunshine Act, notice is that a majority of the Commissioners may be attending Friday’s meeting.

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